The Two-Way

5:49 pm

Thu July 5, 2012

Emails Show Barclays Traders Conspired To Set Interest Rates

Following Barclays $450 million settlement on charges it manipulated interest rate, Britain's equivalent of the SEC released a series of emails exchanged between the British bank's employees that show a pattern of collusion to artificially set rates.

The scandal led to Monday's resignation of Barclays chairman Marcus Agius.

The manipulations may have cost companies and individuals who hold loans based on the LIBOR, or London Interbank Offer Rate, millions of dollars — among them, Rite Aid and Coca-Cola.

"the interest rate that affects trillions of dollars' worth of corporate and consumer loans each year. It is supposed to be a neutral figure that reflects how much it costs a bank to borrow money. But as Barclays has admitted, and other big banks may soon be forced to acknowledge, Libor has occasionally been manipulated — either to create a false impression of a bank's health or to help a bank's traders game the financial markets."

Exchanges between derivatives traders and "submitters," who are supposed to submit impartial data that sets the LIBOR rate, show they worked together to fix rates.

Here's a sample:

On March 13, 2006,a trader writes an email to a submitter that "the big day [has] arrived ... as always, any help wd be greatly appreciated."

When the submitter helps, the trader says "when I retire and write a book about this business your name will be written in golden letters."

But the submitter responds, "I would prefer this [to] not be in any book!"

On April 7, 2006, a trader promises "Coffees will be coming your way either way, just to say thank you for your help." The submitter replies: "Done...for you big boy."

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